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Laugh with LAF

Crislyn Fianza Balangen

A credit program for smallholder families in the

marginal highland areas of the Cordillera



ince the project started in 2009, the credit program of the CHARM2 Project has not seen better time than now. Under its Agriculture Agribusiness and Income Generating Activities (AAIGA) component, the credit program was redesigned to come up with a better and more appropriate credit funding scheme for marginalized farmers in the Cordillera. Thus, the birth of the livelihood assistance fund (LAF).


All effort in this thrust proved rewarding in the end. The LAF was finally approved on February 21, 2014 and its operation finally took off on May 2014. The evolution process for the LAF may have dragged down the project’s performance for a time but it is now making progress with high hopes that it will trail blaze the right credit service for the Project target beneficiaries- the marginalized indigenous families and communities of the Cordillera highlands.


The Livelihood Assistance Fund is a fund allotted under AAIGA to finance livelihood subprojects prioritized in the CHARM2 Project covered barangays and municipalities. LAF consists of fund in support to the development of priority value chains and capital for groups that will engage in  production, marketing and income generating  activities identified during the participatory planning processes in the project sites.


LAF funds will also provide for capital needed by marketing and processing groups with provincial/municipal coverage not included in the PPIPs.


Priority beneficiaries under this facility are the focus poverty groups not reached by regular local and national programs.


The LAF program is aligned to IFAD’s focus on small rural producers engaged in various agricultural and non-agricultural activities, with limited resources and limited access to markets and financial services. This is to assist them increase productivity, income and assets to be later on mainstreamed to the formal credit system.



Spreading the ‘Lafter’

At the field level, the implementation of the LAF is undertaken to the livelihood interest groups (LIGs) under the CHARM2 Project. Funds are downloaded to them through local community funding institutions (CFIs) who serve as the fund conduit for the LAF. This scheme has been pursued in all project covered areas since July 2014. 


To date, around 644 LIGs in the 170 barangays covered by the CHARM2 Project where there are 33 CFIs tapped by the project for the purpose. The CFIs will handle the fund for an easier access for the beneficiaries.


As of March 2015, there are already 504 LIGs that were downloaded with LAF. A total of PhP60,720,000 was allotted for all the LIGs where the distribution of fund is based from coverage whereas municipal wide LIGs are downloaded with PhP500,000 while barangay based LIGs are given smaller funds.


From the 644 LIGs, there are a total of 17,452 members where majority are females (11,133) and males (6,319).


More women are also trained to become leaders in the groups, in their communities through livelihood activities initiated by CHARM2 project.


LAF: It’s An Innovation

The LAF program implemented by the Agriculture Agribusiness and Income Generating Activities (AAIGA) component of the project was an innovation out from the original proposed credit design in the earlier years of the project.


“The original credit design bears interest rates that are based on market rates. This makes it difficult for most project beneficiaries to access the fund,” says Dr. Leonora Verzola, AAIGA coordinator.


Considering that most of the target beneficiaries of the project are smallholder families who are basically earning minimal income, the market rates do not seem to appeal to them.




Moreover, the credit design is not also applicable because the farmers do not have access on formal credit system. Therefore, a beneficiary-friendly credit design must be devised out of the project’sm experience and lessons learned in implementing a credit program.


The Anatomy of LAF

The LAF program does not follow formal credit system for LIGs to download the fund but rather it taps available community funding institutions (CFIs) to serve as its fund conduit.


Consistent with the project’s participatory approach, it involves the local government units (LGUs) in the preparation of business plan/action plan, in the identification of CFIs and beneficiaries, as well as in the monitoring and provision of technical assistance.


The LGUs as partner in this endeavor will also take the lead role to sustaining the program when the CHARM2 project ends.


To bring out the best of the LIGs, the LAF program includes capacitation activities for its LIGs like skills trainings and extension activities which cover technology promotion activities. It also provides technical support in marketing assistance. An equipment/starter kits are even provided to beneficiary groups by LAF as a capital to start and run a business in their localities.


After a year of operation, the LIGs are expected to manage the downloaded funds well, fully complying with the requirements stipulated under the LAF manual.


The LAF manual of operations stipulates that an assessment committee is formed to assess the performance of the LIGs, as basis for transfer/ reflow of the LAF from the CFIs to the LIGs. Depending on the recommendation of the assessing committee, the LAF funds remitted by the LIGs to the CFI within one year upon LAF release, may either be transferred or reflowed back to the LIGs.


Transferred funds by the CFI to LIG shall be utilized by the latter to expand its business operations,having been found capable of managing its LAF sub-project.


However, if the committee recommended for reflow, the CFI shall turn-over to the LIG the remitted amount after deducting 10% handling fee for continued coaching/mentoring since the LIG is found incapable of managing the LAF subproject. The criteria for assessing the LIGs are as follows:

1. The LIG must have implemented sub-project in accordance with the approved business plan, with justifiable deviations if any, 2. The LIG must have collected and remitted 80-100% of the amount borrowed, 3. The LIG must have established books of accounts, 4. LIGs have operational policies based on their approved business plan, 5. The LIG must have savings/Capital Build-Up (CBU), 6. The LIG must demonstrated increase in income and sustainable source of livelihood of at least 80 percent of members, 7. The LIG must have policies on how to manage the organization efficiently and effectively, such as membership promotion and expansion, member benefits and related services. The reflow and transfer of LAF from the CFIs to the LIGs shall be conducted towards project exit. Also, best performing LIGs showing the capacity for expansion of their business operations may be provided with additional funds from the LAF.


LAF: Building Catalysts for Positive Change

Through this program, beneficiary groups undergo transformation where they are built up and sustained. The Project is looking forward to bring about positive change to its beneficiaries by making sure that while project targets are achieved, beneficiaries shall receive the best support to achieve the above mentioned objectives of the program.


Much is yet to be done in the remaining project life, but some indicators for sustainability is being monitored by AAIGA. Such indicators include funds accountability and transparency, ownership, emerging leadership, and timely decision making.


“With the LAF subprojects sustained through continuous coaching from the CFI, Project staff and  LGUs in the remaining project life, LAF could be an  enabling process towards improving productivity and income of responsible beneficiaries,” said Dr. Verzola.//


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